Mr. Tisch attempted to launch a couple startups on his own before trying his hand at angel investing. There was LightsOver, an ill-fated group buying startup he and a couple friends worked on from Mr. Tisch’s West Village apartment after leaving Vornado. That idea never got past building a deck, or PowerPoint presentation, like the ones flashing across the giant TV screen at Demo Day from the startups he mentors. Mr. Tisch’s next attempt was to launch Knowmore out an in-house incubator he ran at KGB, a New York-based directory assistance company. In that case, the product pivoted from “alive” web pages based on KGB’s local data to a personalized content aggregator similar to News.me. But battles with management left it dead in the water.
His first angel investment, which happened in-between the two ventures, was a startup called Boxee, which he discovered through a friend at Wachtell.
“From life,” Mr. Tisch responded when we asked where he got the money to start backing startups. “I made the money doing a lot of different things. I bought stock when I was younger. I took my bar mitzvah money. I sold baseball cards on eBay and AOL. I played poker. I had an ability to take risks with money I’d made from being in a fortunate situation, so I decided that that was something I was going to spend my money on.”
The easy assumption is that Mr. Tisch used his situation to buy his way into a good deal. But in the risky early stages of a startup, founders are looking for investors who can do more than write a check. Young companies with an eye towards growth seek out backers that have the connections and insight to help them scale. Among sought after startups, reputation trumps cash in hand. Of course that may have been less true a few years ago when Mr. Tisch began. Since then, the seed stage market has been flooded with micro-VCs, venture capital firms who want to get in earlier, or accelerators like betaworks.
“I think some people do it professionally to get rich,” Chris Dixon, a serial entrepreneur who invests personally and through the Founder Collective said of angel investing. “They’re entrepreneurs who sell their company, they like startups and want to make modest to hopefully good returns, but a lot of it is to be involved in the community–that’s my motivation.” If you’re looking to cash in, there are easier alternatives, said Mr. Dixon, “I used to work at a quant hedge fund.”
Mr. Tisch met Boxee CEO Avner Ronen because the friend from Wachtell was working at a hedge fund where the CFO’s husband was one of Boxee co-founders. “He got asked what to do and he didn’t know, so he asked me: Is this interesting? I’m like,Yeah! So we had three dinners with Avner and I decided that I’d make an investment.”
Soon after, he set up Box Group, which describes itself a “boutique angel fund,” but is run by Mr. Tisch, who also invests on behalf of his two younger brothers. There was a bit of a learning curve. “I didn’t know enough about the finances behind angel investing,” he admitted. “I didn’t know what pro rata rights were to the point where I protected myself and things like that.”
MR. TISCH WASN’T THE ONLY CANDIDATE UP FOR THE TECHSTARS POSITION. As the now familiar narrative goes, the wheels for TechStars New York program were set in motion at an Angel Boot Camp in Boston in the spring of 2010. Mr. Tisch approached Mr. Cohen with a question: Why isn’t TechStars in New York? “I didn’t know who he was, really. But he seemed like a nice guy,” Mr. Cohen said on the phone from Boulder. On the Bloomberg show, he tells it a little differently: “I thought, who is this arrogant dude?!,” he says with a laugh.
TechStars had actually been considering a New York program for six months, but from their experience launching in Seattle and Boston, the co-founders knew they were missing the pivotal ingredient: a native to get the locals on board. Mr. Tisch wasn’t necessarily auditioning.
Rather, he named a few other candidates who might fit the bill, including Buzzfeed’s Jon Steinberg, who was running the incubator Dogpatch Labs at the time, First Round Capital’s Charlie O’Donnell and New York Tech Meetup’s Nate Westheimer. “It was people who were really connected in the community,” said Mr. Tisch. Back then, that didn’t mean him.
The decision to open a New York outpost and to hire Mr. Tisch to run it happened concurrently, said Mr. Cohen. Along the way, he interviewed three or four other people. “I don’t really want to say who because I don’t think all of them would want that information to be out there . . . that they were maybe looking to make a change,” he explains.
The conversation between Mr. Cohen and Mr. Tisch was followed by a beer at a Times Square hotel and then a visit to Boulder. “I sort of observed him coaching the companies that were in the Boulder program at that time,” said Mr. Cohen. “ Once we started getting to know David, that progressed pretty quickly. There was one other candidate that stayed on the list for awhile. Most of them were ‘one or two coffees’ kind of thing and then there were David and one other person that we spent a lot of time with.”
During the interview process, Brad Feld, another of TechStar’s co-founders, asked Mr. Tisch what his network was like with entrepreneurs, developers, and VCs. By that time, he had six angel investments under his belt, including Flavors.me, CollegeOnly, StackSheet, TroopSwap, and GroupMe. Currently, his number of investments is between 45 and 50. “I’d met a ton of developers because at KGB we’d hired 20 people and I’d probably interviewed 500 developers, so my developer network in New York was weirdly strong. I’d met a decent amount–but not a huge amount–of startup CEOs and VCs. I’d never went out to raise money so I didn’t know a lot of them,” recounted Mr. Tisch. “Brad said, ‘Well, fix that.’ I spent the next month after that meeting every VC I could and then at some point along there, Techstars and me decided to click.”
One of those VCs, Union Square Ventures’ Fred Wilson, Mr. Tisch met for the first time last May. “I was pretty awkward at first, totally nervous,” said Mr. Tisch. “We chatted about the NYC tech scene, what I was thinking about in terms of TechStars versus doing a startup.”
Mr. Tisch, a hockey fanatic who played through college, had been toying around with the idea of a sports gaming startup. In fact, three days after taking the TechStars gig, Mr. Tisch actually found himself presenting it at a Find a Tech Co-Founder event. “I only pitched that night because I had committed and didn’t want to leave them with a hole and I wasn’t allowed to disclose TechStars,” he said. The pitch itself “was embarrassing. People gave me good feedback, but it was a terrible pitch. Looking at the pitches we expect out of TechStars, I would not have rated myself very highly,” he said with a grin.
As managing director of TechStars New York, Mr. Tisch gets a cut of the six percent equity in the startups chosen for the program. In exchange, the finalists were given $18,000 in funding. After raising a $24 million round in September, however, that amount was raised to a $100,000 convertible note. (In January, Y Combinator, the mothership of all modern-day incubators out in Mountain View, announced that Russian billionaire Yuri Milner and SV Angels, Ron Conway’s investment fund, pledged $150,000 a pop to every YC grad.) Mr. Tisch said he wasn’t permitted to discuss the terms of his financial arrangement and whether the job required a buy-in. But, he noted, “We have outside investors who we share the upside with.”
While the decision to hire Mr. Tisch may have clicked for the guys in Boulder and fellow investors, others in the tech scene were left wondering. The tweet questioning Mr. Tisch’s startup cred was immediately and vociferously shouted down on Twitter with investors and entrepreneurs rallying to his defense. But privately some still wondered who, exactly, he was.